2.5.4 Application to Have the Minimum Annual Rate of Child Support Reduced to Nil

Context

Where a child support formula produces an annual rate below the relevant minimum annual rate, and the fixed annual rate of child support does not apply, a minimum assessment will generally be payable. A parent may apply to have the assessment reduced to nil if their income is less than the amount of the minimum assessment multiplied by the total number of the parent's child support cases.

What is the minimum annual rate of child support?

A minimum annual rate of child support of $320 per case is prescribed in the CSA Act (section 66(5)). This amount is increased each year by an indexation factor (CSA Act section 153A). The total liability of a parent under this provision is capped at 3 times the minimum annual rate (CSA Act section 66(6)). See 2.4.12 for information about the minimum annual rate of child support.

When can a minimum assessment be reduced to nil?

A parent can apply directly to a court for a departure order (CSA Act section 116(1)(c)) or can apply to the Registrar to have the minimum annual rate reduced to nil for a particular child support period (CSA Act section 66A).

A parent must satisfy the Registrar that during the nominated period they have very low income, less than the minimum annual rate multiplied by the total number of the parent's child support cases (CSA Act section 66A(2)). The information that the parent must provide will depend upon the circumstances of their case and when their application was made.

An application may be made during the child support period or after the child support period has ended.

Meaning of income

'Income' is not restricted to taxable income. For the purposes of this provision it is defined as (CSA Act section 66A(4)):

any money received, earned or derived for personal use or benefit, or

any periodic payment by way of gift or allowance.

The only exclusions to this definition are prescribed in the regulations (CSA Regs section 13). They are:

amenity allowances or gratuities (incidental payments for personal items or other minor expenses, but not payments for work, study or participation in approved programs) paid to prisoners,

disability support pensions, pensions paid to veterans who are totally and permanently incapacitated and Special Rate Disability Pension for veterans, where at least 85% of the pension is paid to another person for the provision of ongoing care to the pension recipient, and

Example: Amanda, who has been assessed in respect of the cost of her child Sam, has been incarcerated since January 2014. For a child support period starting on 16 November 2014, Amanda has been assessed to pay the minimum annual rate. Amanda makes an application to have the minimum annual rate reduced to nil. Amanda advises that she works in the prison and expects to receive about $7 a day (above the basic amenities allowance) in payment or approximately $1,600 annually. As her income is more than the minimum annual rate of $399, the application is refused.

Example: Frank, who has been assessed in respect of the cost of his child Riley, is a resident in a nursing home. For a child support period starting on 7 April 2013, Frank has been assessed to pay the minimum annual rate. Frank makes an application to have the minimum annual rate reduced to nil. Frank advises that he receives a disability support pension and has no other sources of income. He also advises that at least 85% of his pension is paid to the nursing home for his care. As the pension is excluded by section 13 of the CSA Regs, it is not considered income for the purpose of section 66A of the CSA Act. As Frank's income under section 66A of $0 is less than the minimum annual rate of $391, the application is granted.

'Money':

includes coins and bank notes, cheques and deposits into bank accounts (but not goods, services, or some other benefit, even if the payment is capable of being valued in monetary terms),

is 'earned' when it is received in return for labour or service, in compensation or as profit,

is taken to be 'derived' in accordance with ordinary business and commercial principles. It includes capital payments, trust distributions and royalties,

is taken to be 'received' when it comes into a person's possession. This covers most money which comes into a person's hands including capital payments, e.g. a tax refund, Lotto wins, lump sum compensation, profit from the sale of an asset, deposits into a joint bank account,

must be received for the person's own use or benefit. Income received by a person in another capacity isn't included.

Examples:

A trustee does not receive trust funds for their own use or benefit.

A partner in a 'Business Partnership' only receives money for their own use or benefit when the person receives their individual share of the partnership profit.

Only net income is considered. The Registrar will deduct the person's expenses (that would be recognised for taxation purposes) that directly relate to them earning the particular type of income from their gross income. However 'paper expenses' (such as depreciation of property or assets or carried forward losses) should not be deducted, as they are not considered to relate directly to earning the income and/or do not reduce cash flow.

If expenses claimed are discretionary (e.g. repairs to a rental property), the Registrar must be satisfied that they were necessary before they will be deducted from income.

Example: The landlord of a rental property should be able to show that the property would not have been let if the repairs claimed were not carried out.

Although taxable income is calculated by taking the total amount of deductions away from the total amount of assessable income, the Registrar will consider each individual source to determine the parent's income. Losses from one source will not be deducted from income from another source.

Example: A liable parent has applied for a minimum assessment to be reduced to nil for a child support period starting 1 August 2014. The liable parent has only one child support case and has the following income:

Net dividends $200

Net interest $80

Net distribution from family trust $140

Loss from rental property $500

The loss from the rental property is not taken into account in calculating the liable parent's income. Only net income from each source is considered and losses are not offset against other income. The liable parent's income is $420 ($200 + $80 + $140). The liable parent's application for a reduction will not be accepted as the minimum annual rate of child support for that period is $399.

Nominated period

In their application a parent must nominate a period for which they are seeking a reduction of the minimum annual rate to nil. This period can be either:

the whole of a child support period, if they are assessed at a minimum annual rate for this entire period (CSA Act section 66A(1)(b)(i)), or

part of a child support period, if that part is at least 2 months long and they are assessed at a minimum annual rate for the nominated period of time (CSA Act section 66A(1)(b)(ii)).

The parent must provide the Registrar with information on the income that they did or will receive during the nominated period (CSA Act section 66A(2)).

If a parent wants to reduce their assessments for a period of time that includes more than one child support period they must make an application for each child support period, or each nominated period within a child support period.

Example: Mitch has been assessed at the minimum annual rate since the application for assessment was accepted on 1 February 2009. An assessment was later made for a child support period commencing 1 May 2010. Mitch was not aware of the child support case until August 2010.

Mitch explains that he has been in receipt of a disability support pension since 2008. Mitch can make an application to reduce the minimum annual rate to nil for each child support period, or any relevant nominated period of time.

Decision on application

A parent's application will be granted if the Registrar is satisfied that the parent's annualised income, based on the income for the nominated period, will be less than the amount of the minimum annual rate multiplied by the total number of the parent's child support cases (CSA Act section 66A(2)). If a reduction is granted, it will apply to the days in the nominated period that are subject to a minimum assessment.

Example: Dalil, who has been assessed in respect of the cost of the children in 3 cases, becomes unemployed on 7 January 2014. The child support period runs from 1 February 2013 to 30 April 2014. On 17 January 2014 Dalil elects to use an estimate of income to have the assessment reflect his changed circumstances. Dalil advises that he will receive no income for the remainder of the child support period as he is being supported by his partner. After the assessments have been amended, Dalil is assessed to pay the minimum annual rate in 2 of the cases.

Dalil makes an application to have the minimum annual rate reduced to nil. After investigation, the Registrar is satisfied with the income information provided for the nominated period, from 17 January until the end of the child support period. As the Registrar is satisfied that Dalil's income is less than 3 times the minimum annual rate of $391 ($1,173) the application is granted. The assessment is reduced to nil for the period 17 January 2014 to 30 April 2014.

A parent's annualised income is calculated in the following way (CSA Act section 66A(3)):

Parent's income for the nominated period ÷ Number of days in the nominated period × 365

Example: Fiona has one child support case with a child support period starting 1 September 2013. The assessment is the minimum annual rate. On 1 August 2014 Fiona makes an application for the minimum assessment not to apply. The application is for the period from 1 March 2014 to 22 July 2014 when Fiona was in prison and did not receive any payment other than the basic amenity allowance. The only income Fiona received in that period was $50 in interest income. Fiona has recently been released from prison (on 23 July 2014) and is in receipt of a benefit payment.

In the 144 days between 1 March 2014 and 22 July 2014 Fiona received $50. Fiona's annualised income is $50 ÷ 144 × 365 = $126.74. As Fiona's income is less than 1 times the minimum annual rate of $356 the application is granted.

If the Registrar refuses to grant an application for a reduction, the unsuccessful applicant must be notified in writing (CSA Act section 66C). That person may choose to object to the particulars of the assessment (4.1.2).

If the Registrar grants an application to reduce the assessment to nil, the nil assessment will remain in place until the end of the nominated period. If the other parent disagrees with the Registrar's decision to grant the application, they may object to the particulars of the assessment. If they believe that the assessment does not reflect the liable parent's actual capacity to pay child support, they can apply for a change of assessment (2.6.1).

If the Registrar grants an application to reduce the assessment to nil and the minimum assessment was based on an estimate of income supplied by the liable parent, the Registrar is still able to amend or reconcile the estimated income. Also, the liable parent can make a further estimate of income should their circumstances change (2.5.1).

The Registrar may become aware of a change in the liable parent's circumstances after the assessment has been reduced to nil under CSA Act section 66A. If the Registrar is satisfied that the parent no longer meets the requirements for the reduction then the assessment may be amended to have the minimum annual rate again apply (CSA Act section 66B(b)).

If the requirements of CSA Act section 66A have been met for at least 2 months, the Registrar will amend the assessment from:

the date of the change in circumstances that led to CSA Act section 66A no longer being satisfied, if that date can be ascertained, or

the date the Registrar became aware of the change in circumstances that led to CSA Act section 66A no longer being satisfied.

If the requirements of CSA Act section 66A are found to have never been met, or met for less than 2 months, the Registrar will amend the assessment from:

the date the minimum assessment was first reduced, if CSA Act section 66A was never in fact satisfied.

Example: Greg has one child support case, in which he is assessed to pay the minimum annual rate to Anna for their 2 children. Greg makes an application to reduce the minimum annual rate to nil for the entire child support period. The Registrar is satisfied that Greg's income for the nominated period will be less than the relevant minimum annual rate. The Registrar makes a decision to reduce the assessment to nil.

Three months later, the Registrar becomes aware that Greg is now working part time. As Greg's income is now more than the minimum annual rate, he no longer satisfies the requirements of section 66A. The Registrar amends the assessment under section 66B to reinstate the minimum annual rate from the date that Greg commenced work.

Example: Mandy has one child support case, in which she is assessed to pay the minimum annual rate to Seth for their 3 children. Mandy makes an application under section 66A to reduce the minimum annual rate to nil for the entire child support period. The Registrar is satisfied that Mandy's income for the nominated period will be less than the relevant minimum annual rate. The Registrar makes a decision to reduce the assessment to nil.

One month later, the Registrar becomes aware that Mandy is now working. As Mandy's income was less than the minimum annual rate for less than 2 months, Mandy did not satisfy the requirements of section 66A. The Registrar amends the assessment under section 66B to reinstate the minimum annual rate from the date the minimum assessment was first reduced.

The Registrar must notify the liable parent in writing that the assessment has been amended and that the minimum annual rate is now payable (CSA Act section 66C). The parent can then object to the particulars of the assessment (4.1.2).

Applications prior to 6 January 2009

The Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Further 2008 Budget and Other Measures) Act 2008 amended CSA Act section 66(A) from 6 January 2009. Those amendments do not apply to applications made prior to 6 January 2009.

In relation to applications made prior to 6 January 2009:

a parent's application to reduce a minimum annual assessment to nil must be made in relation to every day in a child support period for which the minimum annual rate applies, and

a parent's application will be granted if the Registrar is satisfied that the parent's income for the 12 months starting from when the parent makes the application will be less than the amount of the minimum annual rate multiplied by the total number of the parent's child support cases (regardless of the period to which the application relates).

WA ex-nuptial cases

The information in this topic applies to WA ex-nuptial cases.

See 1.4.3 for details of the date from which various provisions had effect for WA ex-nuptial cases.